Responding to financial pressures. The effect of managed

1. Fall 2013: Econ 339 Final Presentation Emma Berman November 21, 2013 Responding to financial pressures. The effect of managed care on hospitals’ provision of charity care Reference: Mas,N. (2013), Responding to financial pressures. The effect of managed care on hospitals’ provision of charity care, International Journal of Health Care Finance and Economics, vol. 13, p.95-114 Total:_________

2. Introduction • Managed care in U.S. went from 27% in 1988 to 93% in 2001 • HMO requires gatekeeper and restricts choice of physicians • Financial reimbursement for services depends on network • Hospitals that provide too much charity care will be undesirable for network

3. Charity care • In 2003, uncompensated care burden represented 5.5% of hospital total expenses • Public vs. Private funding • Distribution of uncompensated care varies greatly among hospital types and location • Metropolitan Surrounding Area (MSA) • “Safety net” hospitals

4. Charity care by hospital type

5. Hypotheses 1. There will be many closures of safety net hospitals 2. Hospitals that stay open will face pressure to close the services most commonly used by the uninsured 3. “Only” safety net hospital will face many pressures to keep operating, even if not profitable

6. Methods • Dependent variable is the change in the number of hospitals of each type from 1985 and 1995 • “Only hospital” is a dummy variable • Each type of hospital is presented in groups among an MSA • Patient preference is an omitted variable

7. Managed care effects on the number of hospitals

8. Implications Increase in HMO enrollment: • Negative, but not significant effect on the number of hospitals • Significantly negative effect for number of Government hospitals (G) and hospitals in Poor areas (P) • Positive impact for being the only hospital of a certain type in MSA, but not for Government (G) or Teaching (T) hospitals

9. Effects on the number of hospitals and services provided

10. Implications Increase in HMO enrollment: • Negative effect on the number of hospitals that offer ER, obstetric units, and alcohol/drug treatment for Government (G) and Poor (P) hospitals • Positive correlation with “only” hospitals keeping obstetric units • Anti-dumping laws

11. Conclusion • Managed care penetration, by rising price competition and reducing hospital revenues, has exacerbated the closure of safety net hospitals. • Hospitals that remain open, disproportionately terminate the those services that are most used by the uninsured. • Closure of hospitals will result in reduced healthcare access for patients.